Amazon's aggressive pricing will face a strong counter from the Future Group which is planning to build a loyalty-based convenience storesET Online | August 08, 2017, 16:00 IST

(Thinkstock Images)A war looms over retail segment. A company that dominates online will be up against a company which has turned online-skeptic and is building a huge brick-and mortar chain. Amazon-versus-Future Group war will play out in the next three-four years.

There are reports that Amazon will make its nationwide debut in online food retailing in India during the Diwali season. It also plans to start a private grocery label in India later.

Amazon's aggressive pricing will face a strong counter from the Future Group which is planning to build a loyalty-based convenience stores, which will be driven mainly by low prices.

The Future Group will open in the next four years about 10,000 convenience stores where member-shoppers will get more discounts than those offered by brick-and-mortar chains such as D’Mart, or online rivals Amazon and Flipkart, which recently entered groceries.

"No one can match the prices we will offer. We have built the entire ecosystem such as logistics, partnership with FMCG companies and customer database around the stores. The concept is a hybrid between the kirana (neighbourhood) store, connected commerce and large supermarket," said Future Group CEO Kishore Biyani, speaking to ET a few months ago.

Amazon recently got government approval for stocking and selling food and groceries in India online and through brick and-mortar stores. Initially, it is likely to focus only on online. But Future Group can jeopardise its brick-and-mortar strategy too because by the time Amazon steps into it, Future Group might have consolidated its position.

Each Future Group store will enroll 1,500 customers for an annual fee: Shoppers will get 10 per cent additional discount on each bill apart from existing applicable offers, consumer credit, home delivery options, and access to the online shopping platform.

These smaller stores will have three badges — Easy Day, Heritage Retail, and Nilgiri’s — that have been acquired by the group in the past few years. Since last month, the company has been opening about 15 smaller stores a week. Over the past few weeks, Future Group has been piloting a similar programme at Easy Day and has managed to enrol one lakh members so far.

The target is to have five-lakh members this fiscal. By doing so, Biyani hopes to achieve sales of Rs 40,000 crore through these stores by 2021, double the earlier target of Rs 20,000 crore he had set few years ago.

Biyani is more confidant about his brick-and-mortar play than his online business. He has said he wouldn’t invest or operate in the e-commerce space for at least two years. And he has his reasons: The group has already sunk Rs 300 crore on such ventures, and the industry’s mega ad blitz aside, it is reeling under losses.

India’s leading brick-and-mortar retailer now wants to focus all its energies and cash on the conventional business since that generates much higher returns. Biyani said none of the e-commerce firms in India is making money and losses are as much as their turnover.

Amazon's food retail gambit will ride on low prices and a big brand name but Biyani's expansion too will be based on pricing strategy. This can lead to a fierce price war in which consumer will be the winner in any case.